Hungary Keeps Rates Unchanged Before December Policy Review

(Bloomberg) --

Hungary left its monetary policy set-up unchanged, waiting for further evidence that slower inflation is taking hold before a planned review in December.

The central bank, which now takes the most significant monetary-policy decisions on a quarterly basis, left the overnight deposit rate at -0.05% and the benchmark rate at 0.9% on Tuesday, matching the predictions of all economists in a Bloomberg survey. Rate setters highlighted downside risks to the inflation outlook.

“Previously symmetric risks to inflation became asymmetric in the last quarter,” the central bank said in a statement. “The downside inflation risks have strengthened further, reflecting the effects of the slowdown in European economic activity.”

The bank has lowered borrowing costs more than anywhere else in eastern Europe, with the dovish turn globally only cementing its stance. Last month, Hungary eased policy slightly in what it called “fine-tuning” as new projections suggested slower inflation creeping in from abroad.

Headwinds for the global economy are offsetting a tight labor market and strong consumption at home, pushing inflation below the 3% target in September. Consumer-price growth is “adequate,” central bank Deputy Governor Marton Nagy said last week.

Nevertheless, the market is signaling a greater chance of interest rates rising than falling in the coming year. Forward-rate agreements indicated 13 basis points of increases in the next 12 months.

To contact the reporter on this story: Marton Eder in Budapest at meder4@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Zoltan Simon, Andras Gergely

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